Correlation Between Norfolk Southern and Universal Logistics

Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and Universal Logistics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Norfolk Southern and Universal Logistics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Norfolk Southern and Universal Logistics Holdings, you can compare the effects of market volatilities on Norfolk Southern and Universal Logistics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Norfolk Southern with a short position of Universal Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and Universal Logistics.

Diversification Opportunities for Norfolk Southern and Universal Logistics

-0.7

Correlation Coefficient

Norfolk Southern  Universal Logistics

Excellent diversification

The 3 months correlation between Norfolk and Universal is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and Universal Logistics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Logistics and Norfolk Southern is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Norfolk Southern are associated (or correlated) with Universal Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Logistics has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and Universal Logistics go up and down completely randomly.

Pair Corralation between Norfolk Southern and Universal Logistics

Considering the 90-day investment horizon Norfolk Southern is expected to generate 0.62 times more return on investment than Universal Logistics. However, Norfolk Southern is 1.61 times less risky than Universal Logistics. It trades about -0.19 of its potential returns per unit of risk. Universal Logistics Holdings is currently generating about -0.43 per unit of risk. If you would invest  23,147  in Norfolk Southern on March 18, 2024 and sell it today you would lose (1,157) from holding Norfolk Southern or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Norfolk Southern  vs.  Universal Logistics Holdings

Norfolk Southern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norfolk Southern has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Universal Logistics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Logistics Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, Universal Logistics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norfolk Southern and Universal Logistics

The main advantage of trading using opposite Norfolk Southern and Universal Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, Universal Logistics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Universal Logistics will offset losses from the drop in Universal Logistics' long position.

The idea behind Norfolk Southern and Universal Logistics Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.